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A Small Media Company Poised for Big Growth

Small media company AMC Networks (NASDAQ: AMCX) has undergone an impressive transition in the last year. The company has basically transformed itself from a three-hit wonder to a diverse creator of content. No longer overly dependent on only a handful of shows, management at AMC Networks wisely continues to invest in new content creation.

Moreover, the company now appears to be setting its sights on international expansion as well. For investors looking to play the media space, AMC Networks remains one of the more aggressive plays in the industry, more so than larger competitors like Discovery Communications (NASDAQ: DISCA) and Scripps Networks Interactive (NYSE: SNI) .

Source: Company Facebook.

Out with the old, in with the newFor a long while, I was concerned that management at AMC Networks was struggling too much with replacing its trio of aging shows, which includes Breaking Bad, Mad Men, and The Walking Dead. This was a major concern since the immense popularity of the three shows has provided AMC Networks with leverage in the past when negotiating with cable providers. Essentially, the small media company could bundle its weaker networks like IFC with its stronger ones like AMC Channel, since the latter has traditionally been so popular.

It was only recently that management at AMC Networks began to make some serious progress on the new content front. The company is planning spinoff shows to Breaking Bad and The Walking Dead. Besides the fact that much of the personnel behind each show are returning, which increases the likelihood of success, the return of these brands also likely means a return of their respective ancillary hot talk shows, Talking Bad and Talking Dead.

Additionally, Mad Men is still set to appear live with two more seasons, the first airs in April. One has to wonder at this point, is a spinoff of that show in the cards as well? If so, this could be another major winner for AMC Networks in the future.

However, equally exciting is the company's development pipeline. In the company's most recent earnings call, President and Chief Executive Officer Joshua Sapan explained:

Our development pipeline is more significant than it's ever been. We have several new series that will air in 2014. Turn, a drama about America's first spy ring that takes place during the Revolutionary War, is set to premiere in April. And a show called Halt & Catch Fire, set in Texas in what was called Silicon Prairie, is a story about the rise of the PC era in the early 1980s, and that's coming in June.

Management also explained that the growth strategy that is working for AMC Channel is the same one being employed with the company's other channels, WE tv, IFC, and SundanceTV.

International expansionAMC Networks recently completed the acquisition of Chellomedia, a global operator of cable networks. Chellomedia's portfolio consists of approximately 390 million subscribers in 138 countries across the globe and spans a multitude of content genres including movie/entertainment. This means that Chellomedia can serve as a global gateway for AMC Channel's hit shows in the future.

CEO Sapan explained in the company's release, "Chellomedia has a collection of strong, well-established and well-managed assets worldwide and we're excited about the long-term growth opportunity this acquisition represents for AMC Networks and its shareholders."

AMC Networks going international is a substantial development for shareholders because the company is still very small and has a limited global footprint, compared to competitors like Discovery and Scripps.

For instance, Discovery has been busy making acquisitions over the last few years to branch out in two ways. The company purchased 12 Nordic television channels from Germany's ProSiebenSat.1 Group in late 2012, and recently took a controlling interest in French sports network Eurosport in early 2014. The move significantly expands Discovery's reach but also diversifies its content offerings, which now includes scripted drama and sports for the first time ever.

Scripps has also been busy over the years expanding internationally. The company purchased the Asian Food Channel in 2013 to improve its standing in Asia. The move gave Scripps access to approximately 8 million subscribers in 11 different markets. AFC marks the third channel Scripps has in Asia, with the other two being Food Network and Travel Channel.

Since Discovery and Scripps are already well on their way to expanding globally, it's not surprising that AMC Networks, which is only getting started, is projected by analysts to grow revenue at higher levels. The following is a breakdown of all three companies' projected growth rates in 2014:

Company

Revenue Growth 2014

EPS Growth 2014

AMC Networks

39.2%

24.6%

Discovery

16.6%

24.9%

Scripps

7.4%

10.2%

Bottom lineWhile still in the early innings of global expansion, AMC Networks is already set to begin experiencing the benefits of an aggressive growth strategy in 2014. As the company continues to create new and compelling content, AMC Networks' international expansion should provide ample opportunity for management to reach new audiences.

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